Funds which offered protection against rising prices or exposure to socially responsible (SRI) and environmental, social and governance (ESG) themes stood out in 2021 when it comes to consistent inflows, according to EPFR.
The asset classes expecting the new full-year inflow records included global equity, cryptocurrency, financial and real estate, Europe and municipal bond and all balanced funds.
As far as emerging markets equity funds were concerned, the sector looked ready to set a new inflow mark during 2021, however by the end of the year it became more of a one-horse race, with China equity funds accounting for 99% of the headline number for all emerging market (EM) equity funds.
This was because retail investors, who committed over $25 billion during the first quarter, pulled money out of EM equity funds during late December for the eighth consecutive week, the longest run since a 32-week streak ended in early 4Q19, according to EPFR-tracked EM equity funds.
Additionally, institutional investors were steering money into China equity funds in the expectation that Chinese policymakers would place a premium on economic growth and stability during the run-up to the ruling Communist Party’s 20th Congress in 4Q22.
Looking at sector fund flows, six of the 11 major EPFR-tracked sector fund groups posted inflows, and five recorded outflows, during the final week of 2021but it was a different story for the year as a whole.
The full-year totals included several records, with financials, energy, real estate, infrastructure, commodities and consumer goods sector funds all setting new marks, with flows and collective performance showing the greatest divergence among healthcare and commodities sector funds.
At the same time, technology sector funds, which recorded the biggest inflow in dollar terms among the 11 groups, ended the year with their first consecutive weekly outflow since mid-June, due to concerns about higher capital costs, shortages of highly qualified workers and the likelihood of further scrutiny by regulators which cooled investor appetite for this sector.
Sector fund groups related to consumer demand also stumbled as the COVID pandemic’s latest wave triggered new restrictions and prompted individuals to limit their activities., while industrials and consumer goods sector funds posted outflows, with redemptions from the latter climbing to an 11-week high.
EPFR-tracked developed markets equity funds ended 2021 with another inflow, their 50th of the year, as investors took a more optimistic view of the latest COVID variant’s real impact and chased the latest leg of a US rally.
However, managers of global equity funds saw their exposure to Japan also continued to grind lower, remaining below 10% for the past eight months.
Japan equity funds ended 2021 on a low note with consecutive weekly outflows, although funds domiciled outside Japan posted their biggest collective inflow since the third week of November.
